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2 General promoter
Minimum 7 members combine and want to start a business and submit
there application to the registrar called general promoter.
Promoters duties or promoters characteristics:
a. Idea for business
b. Investigation (raw material. Demand )
c. Selection of first directors (90% of promoters are BODs)
d. Selection of legal advisor (lawyer) auditors and banks like
investment bank
Three main function of investment bank is
1. Underwriting facility
The facilities extended by the investment bankers to the issue of
securities, assuring them that they will get an expected amount to be
paid by the purchaser of the securities.
Two types of underwriting facilities we have. i.e.
a. Best offer
Here the underwriting firms take the commission they try their
level best to flowed the company shares and also advertise
Here Risk is beared by company
b. Firm commitment.
Here the underwriter makes full payments and purchase all the
sharesRisk is totally beared by underwriting i.e. investment
bank
2. Investment advices
It simply means to provide advices to banks, govt etc and also to
the small businesses.
3. Mergers and acquisition
The process in which one of the combining companies looses its
separate identity and the assets and liabilities of the loosing company
become a part of the surviving company- mergers
Acquisition: cant loose its separate legal identity and take the liabilities and
assets of the company in their sharing amount.
1 Promote all the necessary documents (prospectus,
memorandum)
Public company
7-
Raising of share capital
Easily trade in stock exchange
Realization of cash)
Procedure for alteration of objects
The following procedure must be followed otherwise alteration become
void.
1 A special resolution is passed by giving a notice to all
persons who are interested in alteration.
2 An application is filled with the SECP for confirmation of
change.
3 The SECP must check the objections of creditors and be
satisfied that their consent is obtained.
4 After that the SECP will confirm the change if it deems fit.
5 With in 90 days from the date of order of SECP , a certified
copy of the order of the court along with the printed copy of
memorandum must be submitted with the registrar of
SECP
6 Registrar will then issue a certificate of registration, which
will be a proof of alteration in objects.
Doctrine of ultra-vires: An act performed but not authorized by the object
clause of memorandum of association or by statute is called ultra-vires
(unlawful activities)
1 Ultra-vires the memorandum: the act which ultra-vires the
memorandum, the memorandum become void.
2 Ultra-vires the articles: the act which ultra-vires the articles , the
article become void
3 Ultra-vires directors: the act which is beyond the capacity of board of
directors, such acts may be breach of articles so the Co in annual
general meeting may ratify such an unauthorized act of directors by
passing an ordinary resolution.
Procedure for change of name.
A company at many times during the course of its business may change
its name by fulfilling the following conditions.
1 A special resolution is passed
2 Approval of registrar is obtained in witting with respect to change in
name.
3 The registrar enters the new name in register and shall issue a
certificate of incorporation in the changed name.
4 Where the co has unintentionally registered a name similar to that of
an existing name, it can be changed only with the sanction of the
registrar.
b) Article of association.
It is also known as supplementary or secondary document of the co. It is
used for the internal matters/management of the company. Articles of
association must be signed by each subscriber.
Contents of articles of association
3 Amount of share capital issued and transmission of shares
4 Rights of shareholders regarding voting, dividend and return of capital
5 Rules regarding issue of shares and debentures.
6 Procedures as well as regulations on making calls on shares
7 Manners of transfers of shares
8 Rules regarding appointment of directors, managing agent, secretary
and treasurers etc
9 Number , qualification, power and liabilities of directors
10 Convening and conduct of meetings with respect to quorum , poll,
proxy , resolution etc
11 Rules regarding the forfeiture of shares
12 Rules regarding the winding up of shares
13 Matters relating the winding up of the Co.
14 Declaration of dividend.(responsibility of Board of directors )
Difference b/w Transfer of shares and transmission of shares
Transfer of share: when the person is mentally sound and sale out his
shares (dispose off).
Transmission of shares: it is the process of transfer of shares to legal
successor (next to kin) or representative of the deceased person
(shareholder) by the operation of law in case of death, insolvency or
lunacy (unsound mind).
Note: forfeiter- to possessed someone else assets.
Quorum- number of person for conducting meeting, its 1/3 of
directors.
Memorandum of association
Article of association
Memorandum is a fundamental
document.
emergency.
Draft-a legal written document must be prepared by companys legal adviser
(lawyer)
c) Prospectus (public ltd company only)
Prospectus is a document that includes notice or advertisement inviting
public for subscription or purchasing and shares or debentures of a company
or inviting deposits from the public.
Contents of prospectus
I.The contents of memorandum with the name, address, occupation and
description of the person whos names (their in memorandum), the
nature and the extent of interests of the shareholders in the profit and
property of the Company.
II.
Description of business to be undertaken
III.
Description regarding remuneration of the directors or chief
executive officer
IV.
The names, address, occupation and description of the
important office bearers of the company.
V.
Where shares are offered to the public for subscription,
information regarding minimum subscription, preliminary expenses
payable and underwriting commission payable etc.
VI.
The date and time of opening and closing subscription list
VII.
The names of the underwriters and directors opinion about them
that their resources are sufficient to fulfill their obligation
VIII. The names, addresses, description and occupation of the
company vendors and the amount paid or payable to them.
IX.
The estimated amount of preliminary expenses paid or payable
by the company
X.
Any amount paid to the promoters in previous two years.
XI.
The names and addresses of auditors and legal advisors.
XII.
The right of voting of meeting and dividend attached to shares.
XIII. The length of time during which the business of the company
has been carried on.
XIV. A reasonable time and place for the inspection of balance sheet
and income statement.
XV.
A summery in column from the earnings of the company for
each 3 financial years.
XVI. Pending legal proceedings to which the Company is a party.
Liabilities arising from mis-statement in a prospectus
1. civil liability
he who is the director at the time of issue of prospectus, he who
has authorized the issue of prospectus, he who is the promoters of
the company , shall be liable to pay compensation to all those
person who has subscribed to the shares and suffered from misstatement.
2. criminal liability
Where a prospectus includes any untrue statement, every person
who signed or authorized the issue of prospectus shall be
punishable with imprisonment which may extend to 2years or with
a fine which may extend to RS 10000 or with both.
Statement in lieu (instead of) prospectus.
A company having a share-capital which does not issue a
prospectus, so that has been delivered to the registrar for
registration a statement in lieu of prospectus signed by every
person who s name their in as a director atleast 3days before the
first allotment.
Jurisdiction of the company courts
It is provided that court having jurisdictions under the company ordinance
1984, shall be the high court, having jurisdiction at a place at which the
registered office of the company is situated , the central govt may empower
any district court to exercise all or any of the jurisdictions.
Company Benches
There shall be benches in each high court , one or more benches , each to be
known as company bench , to be constituted by the chief justice of high court,
to exercise the jurisdictions under the company ordinance 1984.
Procedure of the company court
i. All matters coming before court under the company ordinance shall be
disposed off (solved) and the judgment pronounced as soon as possible
but not later then 90days form the date of the presentation of the petition
to the court except in extra ordinary circumstances, the court shall hear
the case from day to day.
ii. The hearing of the matters shall not be adjourned except for sufficient
cause or for more then 14days at one time or for 30days at all.
Rights of members.
1. Inspect register of members and debenture holders.
2. In case of public ltd company, they will receive a statutory report.
3. have copies of memorandum and articles on payment of fee
4. receive share certificate with in prescribed time
5. transfers of shares
6. Receive minutes of the proceedings of general meeting.
7. Remove directors.
8. Receive copies of annual accounts.
9. Appoint auditors at general meeting.
10.Inspect auditors report at general meeting.
11.Resolve by special resolution that the company ay be wound up by the
court.
12.Resolve by special resolution that the company may be wound up
voluntarily.
13.Appoint and fix remuneration of liquidators.
14.attend meetings and vote at meeting
15.Approved dividend as recommended by the directors.
16.Have a share in the capital of a company.
Liabilities of share holders.
Where a company is limited by shares, the liability of shareholders is
limited to amount, if any unpaid on shares held by him. This liability is
continuous as long as anything remains unpaid on shares.
Commission on issue of shares.
It shall be lawful for a company to pay commission to any person in
consideration of his subscribing either absolutely or unconditionally for
any shares in the company if:
1. The payment of the commission is authorized by article of
association.
2. The commission paid should not exceed the rate fixed by the
authority.
3. The amount and rate must be disclosed in prospectus, if issued by
the Co.
4. Where a prospectus is not issued, the amount and rate must be
disclosed in a statement in lien of a prospectus.
5. The number of shares for which the persons have agreed to
subscribe absolutely for a commission is disclosed in a specified
manner.
Power of directors
To make calls on share holders in respect of money unpaid on their shares.
To issue shares.
To issue debentures.
To borrow money otherwise then on debentures.
To invest the funds of the company.
To make loans.
To approve annual, semiannual, or periodical accounts as are required to be
circulated to the members.
To incur capital expenditure exceeding Rupees 2 lac on any single item or
dispose off a fixed asset of value exceeding rupees 1 lac.
* will friends there is much more on this subject but I wrote upto here coz I m
having my exam and I do not have more time to write any more. I will try to write
after my exam In-sha-Allah. Hope this little piece of mine will help u all a lot, I
dedicate it to my kindest and hardworking teacher Sir Muhammad Arif.
Written by Amir Sajjad Khan
BBA (hons) 6th semester
Dedicated to Sir Muhammad Arif
Title: Company law of Pakistan
Institute of business and management sciences (ibms)
Agriculture University Peshawar.
Dated: 20/11/09
Email address: amir.msfin109@iiu.edu.pk
Mobile no# 03335297243
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